KUALA LUMPUR (March 25): CelcomDigi Bhd (KL:CDB) is expected to achieve its modest earnings guidance this year and may potentially exceed expectations, driven by moderated cost pressures in network integration and IT system consolidation, according to CIMB Securities.

CelcomDigi has provided a modest earnings before interest and taxes (Ebit) guidance of low- to mid-single-digit growth, implying a FY2025 Ebit of RM2.8 billion to RM3 billion, inclusive of non-cash accelerated depreciation. CIMB Securities’ Ebit forecast of RM2.91 billion and the consensus forecast of RM3 billion are also within this guided range.

“The guidance also accounts for the risk of potentially higher costs in the final phase of network consolidation, as well as costs related to IT system integration and talent refresh, but excludes potential savings from spectrum return,” CIMB Securities said in a note on Monday.

“We believe CelcomDigi’s Ebit guidance has accounted for a fair bit of upside risk on cost. Thus, CelcomDigi should be able to meet its guidance and our forecast — and possibly exceed them if some of these costs end up milder," it added.

CelcomDigi is now in the final phase of its network consolidation, with 25% of integration remaining in FY2025, compared to 40% completed in FY2024, CIMB Securities noted. The company has acknowledged that site decommissioning negotiations may prolong the process into the second half of the year, particularly as it aligns with Digital Nasional Bhd’s finalised network plans.

Meanwhile, the IT system integration — slated for FY2025 — is expected to incur lower costs than network integration.

Shares of CelcomDigi have declined more than 5% this year, as investors reacted to its subdued FY2024 financial performance, prompting at least four analysts to downgrade their ratings. Currently, there are 16 “hold” and “sell” calls which outnumber the 10 “buy” recommendations on the stock.

The company’s 12-month target price stands at RM4.03, according to Bloomberg data, implying potential upside of 17% from its last traded price of RM3.43 at the time of writing on Tuesday.

Despite a relatively high capital expenditure of RM1.8 billion to RM2.0 billion in FY2025, CIMB Securities noted that CelcomDigi remains committed to sustaining and potentially increasing its dividend per share (DPS).

The company has guided for a steady-state pre-tax cost savings of RM700 million to RM800 million per annum by FY2027, which should support its dividend policy.

“CelcomDigi said it will stick to its policy and focus on sustaining/growing its DPS, even in the event of any temporary dips in free cash flow,” CIMB Securities stated, maintaining a ‘buy’ call on the stock, with a mid-range target price of RM4.10, among the analysts tracking the counter.

Read also:
CelcomDigi books RM217m impairment, 4QFY2025 net profit down 64%